It is said that "the market value of Ethereum will surpass Bitcoin", but there are still three uncertain factors
Editor of this issue | Colin Wu
Editor of this issue | Colin Wu
The topic of Ethereum's market value surpassing that of Bitcoin has been rekindled. However, there are still three problems: uncertain technical prospects, unfavorable institutions, and many competitors.
According to coinmarketcap, the current total market value of Bitcoin is 1.091 billion US dollars, while the total market value of Ethereum is 447.5 billion US dollars, which is close to half of the total market value of Bitcoin. In the past year, Ethereum has risen 17 times, compared with Bitcoin's rise of 4.7 times. This also brings up a question that has existed for many years: When will the total market value of Ethereum "turn over" Bitcoin?
The total supply of Bitcoin is 21 million, while Ethereum has no upper limit. The current number of Ethereum is about six times the number of Bitcoin. Therefore, when the price of Ethereum exceeds one-sixth of Bitcoin, that is A turnaround of market value can be completed. At present, it seems that mainstream public opinion believes that Ethereum will reach US$10,000 after EIP-1559, and Jiang Zhuoer even believes that Ethereum will reach US$20,000 in this round of bull market. Is this possible?
In the long run, Ethereum does have the possibility of overturning Bitcoin, and some data has already shown clues. According to cointelegraph[report](1), on May 4th, the total transaction volume of ETH contracts on the entire network reached 87 billion US dollars, surpassing the total transaction volume of Bitcoin contracts of 81 billion US dollars, for the first time in history.
In addition, according to Google trends, the search volume of Internet users for the keyword Bitcoin has not exceeded the search volume at the peak of the Shanghai Bull Market at the end of 2017, while the search volume for Ethereum has already exceeded the previous high and is continuing to rise. Shows enthusiasm for new users.
In terms of on-chain transaction data, Bitcoin’s on-chain transaction volume has been flat for many years due to block size restrictions, while Ethereum’s on-chain transaction volume has been steadily increasing. It is foreseeable that, judging from the indicator of on-chain data, in the future, ETH will be even more far away from BTC.
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Uncertainty factors in ETH's comeback against BTC
At present, BTC has become synonymous with cryptocurrency, and its image of "store of value" has been deeply rooted in the hearts of the people. If the market value of ETH wants to surpass BTC, it still faces many challenges.
1. Potential technical risks
Bitcoin is famous for the stability of its system, and it is extremely conservative about any system changes. The activation of the new function Taproot is currently only supported by 25% of the computing power of the mining pool, but 90% of the computing power is required to pass it (but most mining Chi have expressed their support). Bitcoin used to be criticized for being conservative, but it has been recognized by institutions in this round of bull market and has become a real "digital gold".
Conservation brings great stability to Bitcoin. After more than ten years of operation, it is basically believed that the Bitcoin network is unlikely to have any technical problems. Dogecoin, which is based on the same code system as Bitcoin, has not undergone any development for many years, and the system is still safe and stable, which proves the stability of the Bitcoin system.
On the other hand, Ethereum is an evolving system. Due to the many functions that need to be implemented, the complexity of the system is more than an order of magnitude higher than that of Bitcoin, and the technical complexity will inevitably bring inconvenience. The most visible risk is the fork of The DAO in 2016, which directly led to the creation of ETC. Potential risks in technology make institutions choose to act cautiously when entering.
2. Number of Institutional Investors
Although Ethereum also has a corresponding ETF, it is still very insufficient compared with the more than ten ETFs of Bitcoin and the huge amount of Grayscale Fund. There are many listed companies on the market that publicly hold Bitcoin, including giants like Tesla, while only a few Meitu publicly hold Ethereum. A lack of institutional investors also means a lack of financial derivatives. Although the trading volume of Ethereum contracts surpassed that of Bitcoin for the first time on May 4, the more meaningful data indicator for contracts is open interest. In this regard, the total open interest of Ethereum contracts is still only about half of the open interest of Bitcoin contracts. In addition, for institutions, most of the transactions are carried out on compliant exchanges. On May 4th, the trading volume of Bitcoin contracts on the compliant exchange CME was 2.6 billion US dollars, and the trading volume of Ethereum was 1.1 billion In dollars, the gap is still huge.
3. Questions for future challengers
As a means of "value storage", Bitcoin already has sufficient first-mover advantages, and its status as digital gold has been established. The challengers many years ago have been defeated, and there have been few challengers in recent years. While Ethereum is a decentralized computing system, challengers are still springing up like mushrooms after rain. Apart from other things, let’s just talk about challengers such as Cardano or Polkadot founded by the co-founders of Ethereum, plus Binance’s BSC, which ranks first in transaction volume, Huobi, which is in the ascendant, and the OKEx ecological chain. There came a certain challenge. From this perspective, Ethereum's status as the world's premier platform for smart contracts is not as stable as Bitcoin's status as digital gold for the time being, which also brings uncertainty to its market value comeback.
